Saturday, February 13, 2010

So, McGuinty's $1.6 Million campaign of HST Manipulation has begun, and I thought it no better time to review what happened with the GST, how it started and how it evolved.. Mabye remember many of the promises made by politicians in regards to it, and whether they made good on them or not..
I passed by wikipedia, and I found a great entry on it.

In 1989, the Progressive Conservative government of Prime Minister Brian Mulroney proposed the creation of a national sales tax of 9%. At this time, every province in Canada except Alberta already had its own provincial sales tax imposed at the retail level.

The purpose of the national sales tax was to replace the 13.5% Manufacturers' Sales Tax (MST) that the federal government imposed at the wholesale level on manufactured goods. Manufacturers were concerned that the tax hurt their international competitiveness. The GST also replaced the Federal Telecommunications Tax of 11%.

The proposal was an instant controversy: a large proportion of the Canadian population was irritated and disapproved of the tax. Although the GST was promoted as revenue-neutral in relation to the MST, the shifting of the tax away from exported manufactured goods would make life more costly for Canadians. The other parties in Parliament also attacked the idea as did three Progressive Conservative Members of Parliament, David Kilgour, Pat Nowlan, and Alex Kindy, who ended up leaving the Progressive Conservative caucus as a result.

The Liberal-dominated Senate refused to pass the tax into law. In an unprecedented move to break the deadlock, Mulroney used a little-known constitutional provision to increase the number of senators by eight temporarily, thus giving the Progressive Conservatives a majority in the upper chamber. In response, the Opposition launched a filibuster and further delayed the legislation.

Despite the tax being lowered to 7% by the time it became enacted, it remained controversial. What the tax covered also caused anger. The Government defended the tax as a replacement for a tax unseen by consumers because it was placed on manufacturers, and in the long run it was posited that removing the MST would make Canada more competitive. Once the MST was replaced with the GST prices did not initially fall by the level some thought appropriate immediately, however proponents have argued that in Canada's market economy the MST's replacement could only be expected to influence prices over time and not on a stroke.

Despite the opposition, the tax came into force on January 1, 1991.

A strong Liberal Party majority was elected under the leadership of Jean Chrétien in the 1993 election. The Progressive Conservative Party fared very poorly in that election, winning only two seats. Although the party recovered somewhat in subsequent elections, it remained the smallest party in the House of Commons until it disbanded itself permanently in 2004, and merged with the Canadian Alliance to form the Conservative Party of Canada.

During the election campaign, Chrétien promised to repeal the GST, which the Liberals had denounced so vociferously while they were the Official Opposition, and replace it with a different tax. Instead of repeal, the Chrétien government attempted to restructure the tax and merge it with the provincial sales taxes in each province. They intended to call it the "Blended Sales Tax", but opponents quickly came to derisively call this proposal the "B.S. Tax", and the name was changed to Harmonized Sales Tax before its introduction. Only three Atlantic provinces agreed to go along with this plan, however. Nova Scotia, New Brunswick and Newfoundland and Labrador now have the 13% Harmonized Sales Tax instead of separate GST and PST.

The decision not to abolish or replace the GST caused great controversy, both within the party and out. Liberal Member of Parliament (MP) John Nunziata voted against the Liberal government's first budget and was expelled from the party. Heritage Minister Sheila Copps, who had personally promised to oppose the tax, resigned and sought re-election. She was re-elected with ease in the subsequent by-election, however, as was the Liberal government in the 1997 election.

The GST once again became an issue, as the Conservative Party of Canada reduced the tax by 1% (to 6%) on July 1, 2006 as part of an election promise. They again lowered it to 5%, effective January 1, 2008.